Wednesday, May 19, 2010

OECD - Taxing Wages: Country note for Sweden


OECD - Taxing Wages: Country note for Sweden

Sweden has strongly decreased the tax and social security burden over the past ten years. Taxpayers at high earnings, however, continue to take home less than 50% of what they cost to their employer (“total labour costs”). The difference to other OECD countries is smallest for singles at average full-time earnings: there the average tax wedge (income taxes plus employee and employer social security contributions minus cash transfers as a percentage of total labour costs) in Sweden is 6.7 percentage points higher than for the OECD average. The tax wedge for lone parents at 67% of the average wage with 2 children, however, continues to be high compared to other OECD countries.
Average Tax Wedge for different wage levels and household types
in % of total labour costs
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The tax wedge strongly decreased for all families with about 7 percentage points as a result of the tax cuts implemented over the past 10 years; only single taxpayers at higher earnings faced a smaller decrease in the tax wedge of ‘only’ 5 percentage points.

In 2009, the overall tax burden decreased for all types of households analysed in the Taxing Wages Report. For a single employee with an average wage the average tax wedge narrowed by 1.6 percentage points to 43.2% of total labour costs. A married couple with 2 children, one spouse earning the average wage, the other earning a third of that, saw their tax wedge decrease also by 1.6 percentage points to 37.2% of labour costs.

The tax wedge in Taxing Wages is calculated on the basis of the average gross wage earnings of full-time employees in the private sector, including employees at management level. The corresponding 2009 annual average gross wage in Sweden was SEK 356 725.

More Information
A detailed description of the Swedish tax system and the calculations for the tax wedge in Sweden is included in the Taxing Wages Report.

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